One of the most confusing parts of the home buying/selling process is understanding the closing costs involved. I know before I started in Real Estate, I thought if a home cost $200,000 then I needed $200,000 to buy it. Wrong. There are other fees involved. Even if you have the full amount in cash. Let’s take a look at what you can expect. Remember this is just an estimate. These numbers are based on a home purchase in Texas. Your area may have different fees. Check with a realtor for details.

Sellers:
In Texas, it is customary for the seller to pay for the owner’s title policy. This is based on a formula of .00534 x (sales price -100,000) +843. Let’s take the example of a $200,000 sales price. Your owner’s title policy will cost you $1,377. Additional fees a seller can expect to pay include the broker fees (what your agent and the buyer’s agent are charging to sell your home), escrow fees (this is the what the title company charges to handle the transaction), you will have attorney fees from the title company (this is simply to prepare and review the documents), courier and express mail fees,property taxes (for the time you live in the home), recording fees (to file the documents with the county), survey fee (if you cannot find your original survey or you have made changes to the property), tax certification fee, wiring fees, HOA transfer fee (if you community has an HOA), and in some cases the buyer may ask for a Residential Service Contract otherwise known as a Home Warranty. On a $200,000 sales price, the seller can expect closing costs to be around $17,000 including all of the fees listed above. This is assuming a tax rate of 2.9% closing on May 1st. In some cases, buyers will also ask for their closing costs to be paid. This can add an additional 4% of expense or ($8,000).

Buyers: Your closing costs are different from the owners. Especially if you have a loan for the purchase of the property. With a loan, you can expect to pay to set up an escrow account. Think of this as a mini savings account that the mortgage company is going to use to pay your property taxes and home owners insurance at the end of the year. You will set it up with 14 days worth of interest for the loan, 2 to 3 months of property taxes, and 14 months of home owner’s insurance. Also with a mortgage, you will loan fees. Don’t forget your down payment. The minimum down payment these days in most cases is 3.5% of the sales price. The title company will also charge you a fee for handling the transaction. Let’s take the $200,000 sales price as an example here as well. You can expect closing costs with a minimum down payment to be around $15,000. Remember when negotiating your purchase with seller, you can ask for the closing costs to be paid for by the seller. This will reduce the money you need to bring to closing by $8,000. This means for a $200,000 home you would need $7,000 to close.

Hope this helps clear up some of the questions about closing costs. Remember these are just estimates. Fees can vary from title company and also broker to broker.